BP Oil Spill Observations

paul - Sun, 06/13/2010 - 08:58

The BP Oil Spill in the Gulf is still in progress and all the reasons are not in so I'm not ready to lay blame to any of the parties involved. In fact at this moment pointing fingers is completely counter productive to remedy. Even if I was to try to lay blame I'm not privy to all the facts, but only to what the various media, industry, and government have deemed appropriate to share with the public. So it would be irresponsible on my part to draw conclusions.

What I will do is make some observations and express my thoughts on how the situation created itself and why solutions are perceived to be slow in coming.

In order for oil companies to make a profit they must extract oil at a lower price they sell it. Yet our government, mostly in response to public complaint about prices, pressures oil companies through either taxation, threats of fines, or lack of favor in leases to not make too much profit. Profit is what is used to invest in research on best methods of safety and loss prevention. While these items should not be optional in reality, and this applies to a variety of industries not just oil, when the choices come down to immediate continuance of business they are forfeited with fingers crossed. Businesses must be allowed to generate and keep profits for investment in new technologies.

When a government sets up regulations for the protection of persons and property they should be written with the wanted result specified. For example: "Oil spillage in case of accident shall be contained within a 3 mile radius". Instead of establishing the "acceptable methods" of obtaining these goals, as with any industry the technology available is past the state of regulation. Government inspections, assuming they are carried out properly, become like many tests where you study the test answers and not the subject matter.

If the regulations become the test the company will gladly comply with the answer, but no more, as doing more would put its cost structure higher than competing companies. Government regulations on safety and protection become the guiding light to how an industry reacts, so there is not much motivation to provide better solutions. And if the regulating body isn't performing things deteriorate even further as they become the measure of performance in their areas of control.

If a tax is instituted on each barrel of oil, currently $0.08, for the implied purpose of creating a fund for oil clean up and if you further limit the liability of the oil companies for the spills then you have effectively removed any incentive or responsibility for the companies to invest in better corrective programs and moved, at least mentally if not actually, the responsibility for much of the problem to the government.

This isn't meant to be a complete bashing of either the government or oil companies, but merely some thoughts on the matter. Now how would I solve or at least look at this differently?

As mentioned above, safety and protection regulation derived from law should spell out the wanted result, not the method of obtaining the result. Companies would then be required to demonstrate the result within reasonable means before proceeding with drilling activity. This applies not only to the spill, but the safety of the personnel involved with the reality that there is always risk involved.

There is a difference between adversarial enforcement, which can lead to fraud and collusion, and collaborative partnering between government, industry, and citizens. Yelling at someone to make something happen faster is not the most effective means to obtain the desired results. Remember what happened when your father or mother yelled at you to take out the trash, mow the lawn, or do the dishes? What was your reaction? While adults try to react differently no one reacts well to pressure without positive motivation. A proper inquiry from government to BP would be "How can I help you get your job done?".

As usual, you cannot encapsulate all the problems and answers in a single blog, but these are things to consider. Also, accidents do happen even amongst the best prepared.